In a previous tutorial we talked about individual stocks vs. indices (the plural for “index”). More specifically, we can break this down into 3 categories:
- Individual stocks
Individual stocks are individual, publicly traded companies (on a stock exchange). Here are examples of individual stocks:
- Goldman Sachs
The stock market is classified into “sectors”. Each “sector” has multiple stocks listed under it.
All the stocks in a single “sector” have similar characteristics. For example:
- The S&P 500’s “tech sector” comprises mostly of technology stocks (Facebook, Google, Amazon)
- The S&P 500’s “energy sector” comprises mostly of oil stocks (e.g. Chevron, Exxon Mobil)
- The S&P 500’s “financials sector” comprises mostly of banks (e.g. Goldman Sachs, JPMorgan)
The S&P 500 has 11 widely accepted “sectors”
“Indices” is plural for “index”. We have already explained what a stock index is here.
Here are some common indices for various countries’ stock markets:
- S&P 500 (USA)
- TSX (Canada)
- S&P/ASX 200 (Australia)
- FTSE 100 (UK)
- DAX (Germany)
- SSEC (China)
- Nikkei (Japan)
A stock index (e.g. S&P 500) is broken down into sectors, which are further broken down into individual stocks.
Imagine this as a tree diagram.
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